Cross-border eInvoicing in eRegion – Banks and Technology Providers Perspective

1. A B A N K A Cross-border eInvoicing in eRegion – Banks and Technology Providers Perspective Franc Bračun, PhD Friday, 22nd October Merkur Day 2004

2. Speakers • Chair:Dr. Franc Bračun, Executive DirectorBranch Network, Abanka Vipa, Ljubljana, Slovenia • Speakers:Mag. Martin Mihelčič, Director of Card Business & eBankingSKB banka d.d. - Société Générale GroupMr. Kari Korpela, eBusiness Project ManagerTechnology Centre Kareltek Inc., Lappeenranta, FinlandMs. Andja Komšo, Adviser to the GovernmentHead, Department for Organization and Development of Information TechnologyTax Administration, Ministry of Finance, Republic of SloveniaDr. Tomaž Domajnko, Director, IT Research & DevelopmentSRC.SI, Systems Integration, Ljubljana, SloveniaMr. Tomaž Kavčič, Executive DirectoreBusiness Unit, S&T Hermes Plus, Ljubljana, SloveniaMr. Janez Uplaznik, DirectorMikropis Holding, Žalec, Slovenia

3. Background • There are many aspects to electronic commerce and trading. Being able to present and pay invoices electronically is an obvious element of this, but until recently one of which few organizations have taken full advantage. • In most organizations today, invoices are: • raised manually • printed on paper and • posted to the customer • When the payment period has expired, the supplier will contact the customer to ask why no payment has been received and will here one of the three answers: • There will be a dispute over the order, necessitating a process of checking, adjustment and final agreement • the invoice will be somewhere between the desk of the person who placed the order and the accounts department • The payment will be about to be settled via the payment system This process is time-consuming and cost-inefficient.

4. Evidence of the Need for Change • The bank with 200 people to repair the 30% of payments that they have set up incorrectly; • The insurance company with 90 people to answer the 1 million phone queries it receives annually from suppliers chasing payment; • the supermarket group which cannot reconcile up to 5% of its spend on goods for sale with the invoices it receives; • the procurement organization that rejects 3,000 invoices per month due to incorrect charging information; • the same organization that creates over 1,000 new supplier records each year on its accounting systems; • the drugs company that churns annually 40% of its clinical trial suppliers due to disputes over payments. A list of such horrors could be drawn up from organizations in every industry.

5. Key Business Needs • Purchasing control, efficiency and contract compliance are key to businesses. • Critical elements to achieve these are electronic payments and invoicing solutions. • These need to be practical, and integrated into the end-to-end buying process for use by all within it, not just the accountants.

6. Buyer Tax Procurement Treasury Supply Chain Operations Finance and Accounting Operations Supply Chain Operations Finance and Accounting Operations Treasury Reclaim VAT Reconcile Fit Pay Order Select Receive Reconcile Reconcile Invoice Dispatch Process Order Offer Pay VAT Tax Seller The First Key Point Focus on optimizing the end-to-end supply chain business processes that require invoicing and payments, not on isolated solutions.

7. Invoice Channels Card Payments EDI Electronic Invoices Electronic file transfer Electronic invoice presentment E - mail Magnetic media/CD-ROM XML Paper Invoices Self Billing T&E Card Payment Channels Bank Branch Charge Card Cheque EDI Electronic Payment Initiation Electronic Funds Transfer Internet Banking Telephone PC Banking Purchase Card A clear channel strategy and policy for using channels are required People, Processes & IT Systems Organization • Procurement • Supply Chain Operations • Finance and Accounting • Treasury • Tax Establish a clear ‘channel’ strategy – one-size fit all solutions are impractical in large and in complex supply chains. Different solutions are needed for different areas of spend and for different supply chains.

8. Electronic Invoice Presentment and Payment (EIPP) • With an EIPP system money transactions can be handled end-to-end electronically over the Internet, from rising the invoice to collecting the money.

9. Areas to Address • Cost savings through process and administrative efficiencies (e.g. studies in Europe haveidentified process cost savings of 60% - 77% when purchasing cards have been introduced inspecific areas), and through improved deals based on better information and service with • Improved customer and supplier relationships through reduced exception processing andqueries, and better information • Reduced working capital through improved collections and better use of discounts. Be innovative, but take one step at a time - focus on areas of tangible benefits such as themanually intensive processes that generate non-added value activities.

10. Barriers to moving forward Barriers that need to be overcome before this critical mass occurs include: • A lack of widely accepted standards for interoperable solutions • The need for adoption of widespread and low cost supplier/customer/bank connectivity • Migration away from traditional, high-cost EDI networks to innovative, low-cost internet-based • Upgrade of banking infrastructures to allow processing of the new payment schemes neededto support electronic business processes • The need for a growing number of case studies of successful electronic payment andinvoicing implementations • Changes to executive perception (payment and invoicing processes are boring utilityprocesses that add little value and are generally not broken – so why change?) and greaterexecutive appetite to innovate.

11. Functions and Features • Features and functions to consider are: • Exception processing and dispute management features • Payment schemes (e.g. bulk, guaranteed, conditional) • Clearing system integration – direct debits and credits • XML messaging (to accommodate multiple, organisation-specific invoice formats) • ERP purchase-to-pay processes for large repetitive orders from key suppliers (often purchaseorders against a contract) • Public Key Infrastructure security for electronic transactions • Hosted vs. in house operated applications • Email notification of receipt/sending.